Employee Lawsuit

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The largest share of claims filed against nonprofit organizations is related to employee matters—up to 60–70%, according to Coregis and the Nonprofits' Insurance Alliance of California. While a lawsuit from a current or former employee may not seem as destructive as an earthquake or a flood, its effects on a nonprofit can be just as terrible. Lawsuits are costly. They dampen morale and they damage reputations. Mitigating risk of lawsuits preserves your organizations ability to function, raise funds, and provide services.

Establishing a healthy organizational culture is the best defense against discrimination.

The most important step in preparing a defense against or preventing a lawsuit is for an organization to do everything it can to see that its employees are not discriminated against or harassed in the first place. Consider these essential steps in hiring and managing difficult employees in the workplace.
In hiring:

  • Focus the hiring process on the skills required for the post.
  • Develop a standardized list of questions that will be asked of all interviewees. Make sure the questions relate directly to the skills and abilities required for the job. For example, if a job requires flexibility in terms of scheduling, do not ask a female applicant if she has small children. Instead, ask if she is available to work overtime or irregular hours.
  • Check references thoroughly. Ask the references a list of questions and encourage a conversation rather than simply inquire if someone was “good to work with.”

In managing difficult employees:

  • Be proactive and open about discussing problems with performance and behavior. Have straightforward meetings that provide specific details about what needs to improve. Give them a chance to explain themselves, and discuss possible modifications that could help solve the problem.
  • Document all problems and related discussions that you have with employees. Should the problems escalate, you will have the backup necessary to take action. All serious concerns about the employee should be put into writing and shared with them.  
  • After the meeting and documentation, monitor the employee’s performance in relation to the issues discussed. If you see improvement, let the employee know you appreciate it.
  • If you do not see improvement after investing reasonable time, coaching and support, schedule another meeting. Warn the employee that they are at risk of being dismissed and be clear about what could trigger a dismissal. Review the discussion from the initial meeting. It is advised to have a third party witness present for this type of warning.
  • If behavior/performance does not improve, have a final meeting to inform the individual that he/she is being dismissed. Have detailed documentation available for review to demonstrate that you have taken all appropriate steps and that the process as been fair and transparent.  If the decision is set in stone, start off the meeting by informing the individual that they are being let go, that the decision is final, and that you are happy to discuss the reasons for the dismissal but that the decision will not change.  This helps set the stage for a productive conversation.  Again, ensure a third party is present.
  • If appropriate, offer severance pay. This may soften the blow of dismissal and make a lawsuit less likely.
  • Assess potential fallout from letting an employee go and address it.  For example, in most cases, employees have friends and allies who will become demoralized or angry when they hear the news.  Lettign someone go also typically means that other employees have to pick up the slack temporarily left by the vacanchy and this could cause anxiety and tension.  People may also wonder if they may be at risk of termination. Be very intentional about how the change is communicated and be mindful that there may be emotional reactions that require attention and care.

Though the majority of employment-related lawsuits involve terminations, lawsuits about harassment are also common.   In legal terms, an organization involved in such a lawsuit will need to show that they took “substantial steps to prevent or mitigate such harassment” and that “the employee unreasonably failed to avail him or herself of these measures.”

Click to open interactivity The employment interview is a vital component in the hiring process.

The employment interview is a vital component in the hiring process.

Click here to download a sample interviewing model to help you with your employee recruitment.

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Your organization should establish firm policies against harassment.

The beginning of any effort to prevent harassment should begin with establishing policies which make it clear that harassment will not be tolerated. Employees should be informed of what constitutes harassment and told that disciplinary actions may be taken if harassment is found to have occurred. The policies should be written down and included in a staff handbook and/or posted in a highly visible location such as a break room. In addition, the policies should be discussed at training sessions and staff meetings on a regular basis. The policies should also include a confidential, private, and accessible complaint procedure of which all employees are regularly made aware. Additionally, the policies should include language ensuring that any accusation of harassment be reported to the executive director or another top manager who will be held responsible by the board for thoroughly investigating the report.

In a case where it is determined that harassment has taken place, the organization can take the following steps.

For the harasser:

  • Demotion
  • Wage cut
  • Suspension
  • Oral or written warnings
  • Transfer or reassignment
  • Training or counseling
  • Monitoring
  • Dismissal

For the harassed:

  • Removal of any negative evaluations (e.g., on performance) that may have resulted from the harassment
  • Apology by the harasser
  • Restoring any leave time that was taken as a result of the harassment
  • Monitoring to make sure no retaliatory actions are taken by the harasser or other employees
  • Compensation for any financial losses

Taking these steps will minimize the likelihood that a claim will be filed and may serve as the basis for a defense. But most importantly, these steps will help create a safe and comfortable workplace.

When in litigation, limit discussion about the case.

Getting sued is an upsetting experience. A very human and understandable reaction is to talk to staff or volunteers in the office about the situation. However, leaders should avoid doing this. It is not uncommon for employees or volunteers to inadvertently or otherwise end up giving information that can later hurt the organization in court. Discussion and gossip about the situation should be strongly discouraged.

When an organization receives notice that a claim has been filed against them, they should immediately inform their attorney and begin preparing a defense. In the crisis communication plan, a clear, concise statement should be developed to be used in the event of a lawsuit. Consult an attorney to help craft this statement. Ensure the statement clearly states that matters pertaining to the lawsut cannot be discussed while the case is under litigation. The staff and volunteers should be told clearly to direct any media inquiries to the official spokesperson.

Your organization will want to inform key stakeholders of the events.

Before deciding who to tell, and how much to tell them, talk to your attorney and get his or her advice. People who may need to be informed could include the board, staff, key volunteers, and donors. Volunteers and donors will most likely need to be informed if any publicity could potentially arise from the lawsuit. It is better for these individuals to hear of the situation from an official source in your organization than through a news report. A statement to these stakeholders should express concern and compassion for anyone who has been injured, without admitting liability, and it should reaffirm a commitment to the organization's mission.

If the person who has filed the lawsuit is someone with whom your nonprofit hopes to continue to have a relationship, do not take punitive actions against them. For example, if you are being sued by a client who regularly uses your services, continue to provide those services. If the plaintiff is a current employee, make every effort not to treat them adversely. Burning bridges will not help your case, and will only create more negative feelings.